Which factors determine the firm's elasticity of demand?

Question

Quizplus · Accepted Answer

The firm's elasticity of demand is determined by both the elasticity of market demand (i.e. how responsive consumers are to changes in price) and the number of firms operating in the market. The more firms there are, the more competitive the market and the more elastic each firm's demand will be. Additionally, the nature of interaction among firms (e.g. collusion or competition) can also affect the firm's elasticity of demand. Therefore, option C is the most accurate choice.

Which Factors Determine the Firm's Elasticity of Demand